Thinking About Fire: Reducing Risk & Getting Coverage

As a studio-based artist, one of the very last words you ever want to hear is “Fire!”

But fire can happen. Just ask Christine Enos and Tucker Houlihan, a married couple who make custom furniture in Uxbridge, Massachusetts. One morning in summer 2007, the two were getting ready to leave for work when they got a phone call from a neighbor, who said, “I think your building’s on fire.”

By the time the couple reached the converted mill where their studio was, the building was engulfed in smoke and flame. Everything was destroyed. The cause: improper welding in another shop — nothing that Enos and Houlihan could have prevented.

There are things you can do to lessen the risk that fire will someday strike your studio or workshop — but you can’t make that danger disappear. For that reason, nationally certified fire-protection specialist Stephen Toffolon urges you to both lessen the risk and protect yourself.

Think, Steve says, of a stool with three balanced legs. “You can transfer the risk to an insurance carrier, you can retain some of the risk in the form of deductibles, or you can manage the risk” through fire-prevention strategies. “That’s the three-legged stool.”

Steve is senior vice president at Marsh Risk Consulting, a division of the insurance brokerage Marsh USA, and he’s a volunteer firefighter, in South Windsor, CT. Here are his tips for how to find your own best balance of coverage and managed risk.

1. Getting Coverage; Balancing Risk & Cost

“Of course I would say, get insurance,” advises Christine Enos, who got some after her devastating fire. “Search around for the best coverage.”

Start by making an appointment with an insurance agent. Together with the agent, Steve Toffolon advises, “Do an analysis. What’s being covered, and what’s not being covered? That gives you the game plan.”

If you work from home, don’t assume that your homeowners’ insurance covers your business. Many such policies “cover only a fraction of business-related claims,” the Wall Street Journal recently reported. Read your policy’s exclusions very carefully.

If your agent suggests new insurance, cost may well be an issue — you may feel you can’t afford all the coverage you could get. The key balance point here is likely to be: How large a deductible should you carry?

The higher the deductible, the lower the cost, but the less comprehensive the coverage. Here is where an insurance agent that you trust can help you sort through the options, to find the right balance for your business and your means.

Whatever form of coverage you choose, there’s a lot you can do to:

2. Reduce the Risk!

If your workplace and work involve flammable materials, make sure you’re following the applicable National Fire Protection Association codes. Visit nfpa.org, a searchable site that has NFPA codes and standards, along with fact sheets and safety tips.

In your workplace, “what policies do you have in place,” Steve Toffolon asks — “around flammable liquids, for example? What about preventative maintenance? If you’ve got a policy, what’s the protocol?”

For example, your policy might be that all flammable liquids go into a fireproof cabinet at the end of the day. Your protocol is what you do every day — the routine you follow — to make that happen.

Also, identify and list everything in your shop, down to the smallest items. “That’s critical at the time of a loss, to have the evaluation of what we call the real property,” Steve says.

Finally, quantify your annual, even monthly sales, so you can calculate the likely costs of a business interruption. Along with property damage, that’s the other side of what you’re looking to protect through insurance.